Thursday, March 14, 2013

Lessons from Venezuela experience: between the ideology and pragmatism

History deals with facts , but not that much about the variables which surround those facts . Almost at the closing time of the XX century , in 1999 a strong mix of religiosity , patriotism, wrapped by both ideology and populism, took the Government of Venezuela. All at once in one man at his charge .The explanations of such outcome are lengthy .It involves the main stream of a nation. No matter this considerations, there is a single question of practical implications worth to be asked: Is there any lesson to be learn from such a combination to become the driving force for 14 years in that country?. Let get into that complex issue, focusing only in the political economic side of the story. a.- The Greek roots of democracy, are in the weakest within society, who validated it as a political model to solve problems arising from scarcity. Therefore, democracy becomes weaker and vulnerable, when it does not match the expectation of its people, but it does only that one of politicians, and those who are in the position of getting the rents arising from their privileges. Poverty and inequality living side by side with corruption, create a moral dilemma, hard to solve by market forces alone, whether politicians do not care about it. b.- The State replace the private sector, but at a cost : Any welfare gains have the risk of being transitory and unsustainable. The State does fit better with the combination distribution-taxes, instead of growth-incentives. Therefore, the sources of sustainable growth disappear. Thus, Ideology becomes the driving force to solve what otherwise it might be so by rules, good policies ,smart politicians and consensus. c.- The fundamentals of any economy are not beyond its own boundaries, unless it expands with more investment, innovation, technologies, and better human capital . Even in the case of natural resource rich countries , any attempt to surpasses those fixed boundaries , sooner or later will exacerbate inflation, fiscal deficit, speculation on secondary markets .Without corrections, it might all end at the same stage it began (corruption , poverty and inequality). d.- Ideology do not serve the cause of prosperity and growth as much well as Pragmatism does. Ideology by its own excluding nature ,make democracy even weaker, breaking down the self sustained balance of power. Any economic-political implication from the above? :There are some which it is interesting to be aware of: a.- The pending challenges for Latin America in a globalized world, is a matter of a new generation of pragmatic politicians, focused on people expectations and needs, but also friendly enough with the requirement for growth . b.- The State do not need to excludes the private sector to get its social goals. Distribution and growth are not necessarily self excluding, as long as there is a proper balance to keep incentives working.